The yield on 10-year Treasuries slid 6 basis points to 2.34
percent. The MSCI All-Country World Index was little changed at
4 p.m. in New York, reversing an earlier rally of 0.5 percent
while paring a drop of as much as 0.4 percent. The Standard &
Poor’s 500 Index fell less than 0.1 percent after dropping as
much as 0.7 percent, while the Nasdaq Composite Index increased
0.3 percent. Gold futures declined 0.7 percent, paring an
earlier drop of 1.7 percent. Oil rose and the yen erased losses
against the dollar.

Ukraine said its troops attacked and partially destroyed a
column of armed vehicles that had crossed the border from
Russian territory, while Russia said it was concerned about an
attack on another convoy carrying aid.

“Investors are trying to weed through what exactly is
going on in Ukraine,” Stephen Carl, principal and head equity
trader at New York-based Williams Capital Group LP, said in a
phone interview. “We have a geopolitical situation that needs
to be addressed, and that’s overshadowing everything else in the
market.”

The S&P 500 yesterday climbed 0.4 percent to reach its
highest level since July 30. It rose 1.2 percent this week.
President Vladimir Putin said yesterday that Russia shouldn’t
isolate itself from the outside world, as he pledged to work to
halt the conflict.

The government in Kiev has for months said that separatist
rebels in its easternmost regions are receiving support from
Russia, which backs them with artillery fire. Russia has
repeatedly denied any involvement in the Ukrainian unrest.

The Chicago Board Options Exchange Volatility Index, which
usually moves in the opposite direction to the S&P 500, jumped
5.9 percent to 13.15, halting five days of declines. The gauge
lost 17 percent this week in its biggest drop since April.

Gold, Yen

Gold fell 0.7 percent to $1,306.50 an ounce for the largest
decline of the month. Oil futures rallied 1.9 percent, the most
since July 17. U.K. natural gas climbed for a third day, soaring
4.1 percent. Europe gets about a third of its natural gas from
Russia, half of it through Ukraine.

The yen rose 0.1 percent to 102.34 per dollar, after
falling as much as 0.3 percent earlier. Japan’s currency was
down 0.1 percent at 137.09 per euro. The euro rose 0.2 percent
to $1.3395 after sliding to $1.3333 on Aug. 6, the lowest since
Nov. 8.

Global Growth

The S&P 500 rose as much as 0.5 percent in morning trading
as signs the economic recovery is slowing stoked bets that
central banks will leave interest rates near record lows for
longer. Global growth has struggled to gain momentum as the U.S.
recovery plods on, Europe grapples with geopolitical tensions
and China contends with a property slump and investment-spending
slowdown.

Reports today showed an uneven recovery. U.S. factory
production increased in July at the fastest in five months as
capital spending climbed and motor vehicle demand surged. The
Thomson Reuters/University of Michigan preliminary index of
sentiment dropped to 79.2 in August, the lowest since November,
from 81.8 in July, according to data issued today. Wholesale
prices in the U.S. rose at a slower pace as fuel costs dropped
by the most in eight months.

Fed Watch

Limited price pressures give the Fed room to maintain an
accommodative position as they scale back their monthly bond
purchases, which are on pace to end in October. Recent economic
strength had created concern that the central bank may be forced
to act on rates sooner than anticipated. Federal Reserve Chair
Janet Yellen has said officials will keep the benchmark rate low
for a “considerable time” after the bond buying ends.

Financial markets are probably mistaken if they’re counting
on Fed interest-rate increases to occur more slowly than policy
makers forecast, St. Louis Fed President James Bullard said.
Futures contracts on the federal funds rate show investors
expect the benchmark to rise to 0.63 percent at the end of 2015,
while the Federal Open Market Committee’s median projection for
the end of next year is 1.13 percent.

“The market is trading too dovishly compared to the
committee,” Bullard said today in an interview on SiriusXM
satellite radio. “I think that’s probably a mistake,” he said,
adding that market participants “should come closer to where
the median of the committee is.”

European Bonds

Government bonds across the euro area advanced for the week
amid faltering growth and bets inflation will remain subdued.
Rates have set new euro-era lows from Ireland to Austria, while
Germany’s 10-year yield slid below 1 percent for the first time
yesterday.

ECB President Mario Draghi committed last week to build on
the unprecedented stimulus unveiled in June if the outlook
deteriorates.

“We might have to rely on more European Central Bank
policy,” said Thomas Thygesen, head of cross-asset strategy at
Skandinaviska Enskilda Banken AB in Copenhagen. “Investors are
trying to figure out what kind of correction they witnessed. It
could be a risk-sentiment correction where there is no economic
fallout from the crisis in Ukraine, or we could have a weaker
European economy that is less able to withstand even a modest
hit. Next week’s August data is going to be crucial.”

BHP Billiton

Mining companies gained on the Stoxx 600 as BHP Billiton
BHP Billiton Ltd. jumped 1.2 percent after saying it will
discuss spinning off parts of its business. The world’s biggest
commodity producer said it will focus on its iron ore, copper,
coal and petroleum businesses. The board meets next week to
debate a demerger of some of its other assets. Rio Tinto Group,
the world’s second-largest mining stock, climbed 0.9 percent.

Global Stocks

The MSCI All-Country index trimmed its weekly gain to 1.6
percent, its best performance since April. The gauge is down 2.3
percent from its record reached July 3.

The U.S. posted a record cross-border investment outflow in
June as China and Japan, the two biggest foreign holders of
Treasuries, reduced their holdings of U.S. government debt.

The total net outflow of long-term U.S. securities and
short-term funds such as bank transfers was $153.5 billion,
after an inflow of $33.1 billion the previous month, the
Treasury Department said in a report today. The June figure, and
$40.8 billion in net selling of Treasury bonds and notes by
private investors in June, were the largest on record, the
Treasury said.

The MSCI Emerging Markets Index added 0.3 percent,
increasing for a fifth day and bringing this week’s advance to
2.9 percent, the biggest rally since March.